2016 Supreme(AP) 467

IN THE HIGH COURT OF JUDICATURE AT HYDERABAD FOR THE STATE OF TELANGANA AND THE STATE OF ANDHRA PRADESH
RAMESH RANGANATHAN, M. SATYANARAYANA MURTHY, JJ.
The Institute of Chartered Accountants of India, ICAI Bhawan, P.B.No.7100 – Petitioner
Versus
Mukesh Gang, Chartered Accountant – Respondent
Referred Case. No. 2 of 2011
Decided On : 26-09-2016

Headnote:

Chartered Accountants Act, 1949 – Sections 21 (5), (6) and 22 – Employment and Service matter – Disciplinary proceedings – Misconduct – Power to impose punishment – order against the respondent including imposition of penalty/punishment – During the course of investigation, it was found that the respondent, as the statutory auditor of the company, had given a certificate dated 09.06.1995 certifying that the entire promoters contribution had been received by the company – Respondent, a Chartered Accountant, established a firm by name M/s M.Gang & Co, which was appointed as a Statutory Auditor of Company – General Manager, Securities and Exchange Board of India- SEBI addressed a letter to the President, Institute of Chartered Accountants of India-Institute stating that it had conducted an investigation in the primary market and secondary market transactions in the scrip of the company which had come out with a public issue in 1995 – Whether in a reference made to this Court, and in exercise of the powers conferred by Section 21 (5) and (6) of the Chartered Accountants Act, 1949, the High Court can re- appreciate the evidence on record, and re-examine the conclusions arrived at by the Institute – Whether the Institute has violated Regulations 16 (2) and 16 (5) of the Regulations and, if so, whether the entire proceedings are vitiated – Whether these disciplinary proceedings are quasi- judicial and quasi criminal in nature and, if so, what is the standard of proof applicable to such disciplinary proceedings against a professional – Held, Professional misconduct may consist in betraying the confidence of a client, in attempting by any means to practise a fraud or impose on or deceive the court or the adverse party or his counsel, and in fact in any conduct which tends to bring reproach on the legal profession or to alienate the favourable opinion which the public should entertain concerning it – It is evident that the allotment of shares of Rs.2.25 crores to the promoters was fraudulent, and without receipt of contribution from them and, on the basis of the cheques issued by the promoters just one day prior to opening of the public issue, the certificate was issued. The Statutory Auditor was obligated to ascertain whether the company had received the consideration of Rs.2.25 crores before certifying to the fact. As noted hereinabove, the promoters of the company resorted to jugglery of the figures in the books of accounts, transferring money from one person to another, or routing the money through M/s Pratha investment which was manned by the respondent, and belonged to his wife – Council of Institute has recommended removal of name of respondent from Register of Institute for a period of three (3) years i.e. suspending him from practicing as a Chartered Accountant for a period of three (3) years – Recommendation of the Institute, regarding the nature of the punishment, is not binding on this Court and, in exercise of the wide powers conferred on it by the Act, this Court can impose a different punishment – In a similar situation, Division Bench of this Court, in Council of the Institute of Chartered Accountants of India v. V.I.Oommen (referred supra), imposed a higher punishment than one recommended by the Institute – In the light of the above discussion, after anxious consideration of the matter, we find it appropriate that the respondent herein should be suspended from practising as a Chartered Accountant for a period of three years from 01.11.2016 to 31.10.2019 – Directing respondents membership with the Institute of Chartered Accountants of India shall stand suspended from 01.11.2016 to 31.10.2019, and, consequently, during that period he shall not practice or function as a Chartered Accountant – Directions issued – Referred case is disposed of.